The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

Image via Wikipedia

Anadarko Petroleum has agreed to pay BP $4 billion in an agreement to settle claims relating to the April 2010 U.S. Gulf of Mexico disaster that resulted in the death of 11 workers and the worst oil spill in U.S. history. Anadarko owned a 25% stake in the Macondo well which blew out. [1]

The contract terms dictated that Anadarko would foot 25% of the costs arising from the the well unless BP was found guilty of gross negligence. BP has welcomed the settlement and has appealed to other parties involved in the contract to also accept their responsibility in the incident.

While $4 billion is a big number, the market expected it to be even greater; and for this reason, in addition to the fact that any uncertainty surrounding future legal liabilities has been eliminated, this is actually positive news for Anadarko. The stock traded up by more than 5% on the news.

As part of the settlement, Anadarko has also agreed to drop its case against BP for gross negligence. Anadarko will now contribute $4 billion to the $20 billion fund set up by BP to meet the legal liabilities arising due to various claimants including local citizens, businesses and the government.

Analysts were expecting a payout from Anadarko after Mitsui & Co. Ltd, which held a 10% stake in the well, agreed to pay $1.1 billion for the incident. While the $4 billion settlement by Anadarko seems pricey in comparison, it was actually less than many analysts were expecting. [2]

BP is also looking for similar participation from other contractors involved in the Deepwater Horizon incident. Rig operator Transocean and oilfield services provide Halliburton were contracted by BP to develop the well. BP’s efforts to transfer some responsibility of the disaster onto these companies has resulted in extended litigation.

However BP’s position received a shot in the arm last week when the Bureau of Safety and Environmental Enforcement issued 4 citations each against the service contractors for their role in the blowout. (See: Schlumberger Earnings Preview: What We’re Watching)